Broking groups have reported a spike in borrower enquiries following the Reserve Bank’s decision to slash the cash rate to a new record low.
On Tuesday, the Reserve Bank of Australia (RBA) cut the official cash rate for the first time in almost three years, dropping the cash rate by 25bps to 1.25 per cent.
Several lenders, including the big four banks, have passed on the rate cut partly or in full to mortgage customers, which, according to broking franchise groups Mortgage Choice and Loan Market, has triggered an “influx” of borrower enquiries.
Andrea McNaughton, Loan Market’s executive director of growth, told The Adviser that the broking group received an overwhelming response from clients after informing them of changes in the interest rate environment via a marketing campaign.
“I think it’s been an exciting few weeks, a lot more confidence has returned to the market, and I think the trifecta was Tuesday, with the announcement of a cut,” Ms McNaughton said.
“We’ve sent out a text message and an email campaign to our client base, simply saying, ‘great news about the interest rate reduction this week, let’s chat so we can tell you what this means for our loan and how simple our process is to review – message me back and let’s get the ball rolling’.
“We had about 12 response to that in 20 minutes to see brokers.”
Mortgage Choice CEO Susan Mitchell also reported a sharp uptick in borrower enquiries, from both refinancers and those looking to secure a new loan.
“A number of brokers received calls from their existing customers, who had heard news from the media and their family and friends about low interest rates, with many new enquiries originating from referrals,” she told The Adviser.
“Brokers have said a number of customers had called asking if they can get a rate below 4 per cent, particularly investors who had been holding back on their property buying plans.
“Interestingly, some brokers have reported an increase in enquiries from customers wanting to exit a fixed term and while it isn’t always economically feasible, there are lenders offering competitive deals.”
Ms Mitchell said that the spike in enquires has also been evident among first home buyers (FHBs) who were previously hesitant to enter the property market amid uncertainties.
“Brokers have also reported an increase in enquiries from first home buyers who feel more confident about taking their first steps towards home ownership,” Ms Mitchell said.
“Some have attributed this sentiment to a change in the political climate, others put it down to the news around lower interest rates and falling property values.”
The rise in borrower enquiries following the RBA’s monetary policy adjustment was also reflected in an analysis from comparison website Finder.com.au, which reported an unprecedented 654 per cent increase in traffic to home loan deals within 48 hours.
According to Finder, interest in variable rates grew by 564 per cent, while refinancing enquiries spiked by 369 per cent.
However, despite the uptick in enquiries following widespread cuts to mortgage rates, tighter lending conditions have inhibited borrowers from easing their mortgage burden, at least according to new research from S&P Global Ratings.
Ms McNaughton acknowledged the challenges, but said she expects the Australian Prudential Regulation Authority’s (APRA) proposed changes to home loan serviceability guidelines to improve access to credit.
“I think we’re all hoping that that will ease a bit now [that] APRA has made that decision,” the Loan Market executive said.
In the meantime, the Mortgage Choice CEO encouraged brokers to capitalise on the growing demand for finance.
“As sentiment turns, brokers should take the opportunity to reach out to those in their database who have made an enquiry in the last few months,” Ms Mitchell said. “Check in with them, find out where they are on their property buying journey and remind them that you are here to guide them.”
She continued: “Similarly, it is paramount you communicate with your existing client base and ensure their needs are still being met. Invite them to do a home loan review to ensure they are getting a competitive deal and ask them if their loan is still meeting their needs.
“This will be particularly important to those customers whose lender has not passed the rate cut on in full.”
Ms Mitchell also urged brokers to use the opportunity to promote their brand to strengthen their client base.
“For brokers out there who do not have a database, take advantage of the positive sentiment in the market. Increase your local marketing efforts, boost your profile – even if it means hitting the pavement, shaking hands in your local area and introducing yourself as the local home loan expert,” Ms Mitchell concluded.
[Related: Broking industry reacts sot cash rate move]
Charbel Kadib is a journalist on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.
Charbel graduated from the University of Notre Dame Australia with a Bachelor of Arts (Politics & Journalism).
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